UPDATED…Game On: Stronach Tracks Sue Tournament Operator Derby Wars

Five racetracks owned by the Stronach Group have filed a lawsuit against DerbyWars, a website that operates what it calls “horse racing fantasy tournaments” offering cash prizes to contestants. The suit alleges DerbyWars contests are a violation of the Interstate Horseracing Act (IHA), the Racketeering Influence and Corruption Act (RICO) and California Business and Professions Code and inflict “intentional interference with prospective economic advantage.”

The suit was filed on Wednesday in United States District Court in the Central District of California. No individuals were named as owners of DerbyWars, which is operated by the Delaware limited liability company Horse Racing Labs (also known as Immerse, LLC) that is based in Louisville. According to the DerbyWars website, HorseRacingNation.com founders Mark Midland and Michael Shutty created DerbyWars in 2011.

Midland talked about DerbyWars in an interview with the Horseplayers Association of North America in 2014. DerbyWars has affiliations with the National Thoroughbred Racing Association and the NHC tour as host of qualifying tournaments throughout the year.

The tracks listed as plaintiffs are Los Angeles Turf Club (Santa Anita), Pacific Racing Association (Golden Gate Fields, Gulfstream Park, Maryland Jockey Club (Pimlico and Laurel) and Oregon Racing (Portland Meadows).

The complaint alleges that DerbyWars claims to be a “skill-based fantasy league competition based on professional horse racing, where winners are awarded based on their abilities to skillfully pick horses and compete against other players over a series of races. … Prizes will be awarded to players who are most successful in selecting winning horses in actual horse races at actual licensed tracks. … Each contest will have a fixed entry fee, a fixed prize pool and a maximum number of entries.”

Winning selections are awarded points, and the player with the highest number of points wins a cash prize, according to the DerbyWars site and the complaint. “DerbyWars keeps a percentage of the tournament 'pool' for itself, and none of the money goes to the race meets where the races used in the contest were run,” the suit alleges.

“This is indisputably a form of wagering on the results of horse races,” the suit claims, “which is not in compliance with federal or state laws because the consents required under the IHA have not been given and DerbyWars does not hold a license permitting it to accept wagers from California, Florida, Maryland or Oregon.”

Under the Interstate Horseracing Act, the complaint states, in order to accept an interstate off-track wager on horse racing, consent must be acquired from “1) the host racing association (and its respective horsemen's group), and 2) the host racing commission, and 3) the off-track racing commission.”

The complaint says DerbyWars does not fit as the kind of fantasy sport allowed as an exception to the Unlawful Internet Gambling Enforcement Act (UIGEA) passed by the U.S. Congress in 2006 because “the winning contestant is determined by being the player who is 'most successful in selecting winning horses in actual races at actual licensed tracks' which takes the player out of the fantasy sports carve out found in the UIGEA which does not apply if the winning outcome is based on 'any performance or performances of any single real-world team or any combination of such teams, or solely on any single performance of an individual athlete in any single real-world sporting or other event.'”

The UIGEA law has been at the center of controversy recently because of the explosive growth of Daily Fantasy Sports involving football, baseball and other sports. Draft Kings and FanDuel which operate Daily Fantasy Sports tournaments are the subject of multiple legal challenges.

The plaintiffs are seeking injunctive relief and monetary damages, restitution of profits, punitive and exemplary damage, along with attorney's fees.

DerbyWars responded to the lawsuit Thursday afternoon with the following statement: “We are in receipt of the Stronach Group's lawsuit but find the claims without merit and our attorneys are handling this matter.

“With DerbyWars, we have seen first-hand the ability of contests to create new fans and re-engage old ones. Horse Racing Labs, the parent company of DerbyWars, was founded to create new ways to grow horse racing.

“'I have dedicated my entire career to advance the sport of horse racing,'” said Mark Midland, founder and CEO of Horse Racing Labs. “'This passion and love for the sport is shared by our entire team.'

“As the industry has acknowledged time and time again, the sport is in dire need of new ideas and innovation to ensure growth for the future.

“More than 70 million Americans are participating in fantasy sports, and contests are an opportunity that needs to be explored for horse racing. Horse racing has already seen promising results from the $2.5-million National Handicapping Tournament and other contests which serve well as marketing tools for the sport. The claims in the lawsuit serve to call into question all contests in horse racing.

“DerbyWars is enthusiastic about the track partnerships in place and we look forward to working with more tracks over the coming months in new and exciting ways that create wins for the tracks, fans and the entire sport.

“DerbyWars is operated by parent company Horse Racing Labs, which has a proven track record for innovation and fan-based initiatives. Horse Racing Labs (formerly Immerse, LLC) also owns and operates HorseRacingNation, a leading horse racing news & community site launched in 2009. The company is also launching HorseRacingUniversity.com, the industry's first fan-education site in January 2016.”

To read the complaint,  click here.